OpenSea breaks silence on NFT royalties, but creators don’t like what they hear – decrypting

Business News / By /

Shortly

  • OpenSea announced its plans for licensing fees for NFT creators amid a growing trend that competing marketplaces are not honoring them.
  • Reputable creators point out that OpenSea’s message is unclear and potentially misleading, and that part of the plan is anti-competitive.

With many NFT platforms moving away from acknowledging creator-set royalties in recent weeks, top marketplace OpenSea has been silent on the issue, seemingly weighing its options. On Saturday night, the $13.3 billion startup finally showed its cards – but OpenSea’s newly voiced strategy hasn’t gone down well with many prominent Web3 creators.

in the a twitter thread, OpenSea shared what it called a “thoughtful, principled approach” to NFT royalty payments, including introducing a system that would allow new project creators to blacklist certain marketplaces where traders don’t have to pay royalty payments . This system will come into effect on November 8th.

OpenSea said it is still considering what to do with existing NFT projects and will gather additional community feedback ahead of time a self-imposed deadline of December 8th. After that date, the marketplace will make a decision — which could ultimately include making royalty payments optional for merchants, as some other marketplaces have done.

“In terms of transparency, the consideration of what happens after December 8 is wide open -[with] Options ranging from further enforcing off-chain fees for some subsets of collections, to allowing optional creator fees, to collaborating on other on-chain enforcement options for creators,” the marketplace tweeted.

In an accompanying blog post, Devin Finzer, OpenSea’s co-founder and CEO, explained the company’s history of issuing NFT royalty payments — typically a 5% to 10% fee set by the creator and levied by the seller on each sale paid to the secondary market. These royalty expectations are not fully enforceable on-chain, but the largest marketplaces (including OpenSea) have typically met them.

In recent months, many emerging and competing marketplaces have attempted to gain market share by offering royalty-free trading or making it optional. Almost all of Solana’s NFT market is now using these models after Magic Eden made royalty optional for traders and Ethereum platforms like X2Y2, LooksRare and Blur followed suit.

When creator royalties are not required, many merchants choose not to pay them. Data from X2Y2 at the end of October, shared by Pseudonym Proof Director of Research Punk9059, showed that only 18% of merchants bothered to pay royalties. “Free-riding is too easy,” they said.

Finzer tried to take a clear stance in his post, writing in partially bold text: “It is clear that many developers want the ability to enforce fees on-chain; and fundamentally, we believe the choice should be theirs – it shouldn’t be a choice that marketplaces make for them.”

However, the overall OpenSea message does not resonate as clearly as this single comment, as many NFT creators are raising the alarm on social media, believing the comments are misleading or unclear intentions about the true path of the market.

Blacklist competitors

OpenSea’s new enforcement system provides code for Ethereum NFT creators to insert into their newly launched NFT smart contracts that point to a blacklist that prevents these NFTs from being traded on all listed marketplaces without royalties or optionally with License fees are traded. Smart contracts contain the code that drives NFT projects and autonomous decentralized apps (dapps).

It’s a similar approach recently taken by famed generative artist Tyler Hobbs for his new QQL project. Hobbs and his collaborator Dandelion Wist implemented a similar blacklist that prevents NFTs from being traded on platforms that do not respect creators’ royalties. X2Y2 in particular complained about being blacklisted, suggest that it affects the rights of NFT owners.

Befriended creators supported Hobbs and Wist on their project-centric blacklist. But in OpenSea’s case, the blacklist is a who’s who of direct competitors: X2Y2, LooksRare, Blur, and SudoSwap. The company’s guidance for creators to block these marketplaces appears anti-competitive, according to some NFT merchants and creators who have spoken out on Twitter.

“OpenSea is losing market share to other marketplaces that are eliminating copyright royalties.” tweeted Bobby “Bobby Hundreds” Kim, co-founder of fashion brand The Hundreds and NFT project Adam Bomb Squad. “So this solution is a practical value proposition. It blocks their competitors AND ensures artists get paid for secondary sales on their platform.”

Angharad “Harri” Thomas, product director at Proof, tweeted that the move could only further centralize market power and dominance for the platform. “OpenSea royalty payments are completely off-chain,” she wrote. “You’re actually saying, ‘If you block our royalty-free competitors in your contract, we’ll activate the royalty for you in our centralized system.'”

“Misleading” Messages

Arguably the bigger question is what OpenSea’s plans mean for creators of existing NFT projects. The firm said it could make royalty payments optional for merchants, but also enforce them for “some subsets of collections” or use other potential enforcement methods upfront. Creators may need to change their projects and provide new contracts to use such methods.

All is unclear at the moment, and Finzer’s commitment to rewarding royalties is not much certainty for some creators and distributors. After all, Magic Eden, the leading Solana marketplace, supported royalties and said it would continue to honor them — then flipped just days later as competitors chewed away its market share. Some have accused OpenSea of ​​similar fog and mirror tactics.

“[In my opinion]the OpenSea announcement is a clever realignment to bring existing collections to zero royalty,” wrote Betty, the pseudonymous co-creator of the NFT project Deadfellaz. “This will disproportionately screw up emerging artists and marginalized creators who need to turn to VC funding. Statistically, over 95% of VC funding goes to men.”

She remained unconvinced after speaking to OpenSea executives today. “It seems like there is no plan and no clear answers have been given regarding existing collections and artist fees.” she tweeted. “Communication was misleading and facts are non-existent.”

Artist Ryan “ThankYouX” Wilson recommended that the announcement was “another slap in the face of OpenSea for the makers”, and the “They just want to confuse people into thinking they care about us and help us.” He added that the news was supposed to come out on Monday and that OpenSea made it “hasty” to ease creator concerns about the initiative.

By setting a deadline of at least one month, OpenSea is more aware and public when deciding on royalty payments than many of its competitors (although Rarible has already championed royalty payments). Still, some artists are skeptical about the goals of OpenSea and try to gather people in the NFT space to get the message across.

“Philosophically, the waiver of royalties for creators throws the entire mission of Web3/NFTs into question.” Bobby Hundreds tweeted. “Until now, the primary thesis for this remarkable technology has been to get artists paid for their work.”

“So now it’s up to you, the collectors, the creators and the critics, to be heard and decide what happens.” he added. “If OpenSea, as the largest mainstream NFT marketplace, pulls out the license fees for creators, it will have a significant impact on the entire ecosystem.”

Stay up to date on crypto news and receive daily updates in your inbox.